19 lines
1.3 KiB
Plaintext
19 lines
1.3 KiB
Plaintext
This holds true whether the options are in-, at-, or out-of-the-money. For
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example, with a stock at $54, the 50-put would have a −0.205 delta and the
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call would have a 0.799 delta. Selling 100 shares against the call to create
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the synthetic put yields a net delta of −0.201.
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If long or short stock is added to a call or put to create a synthetic, delta
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will be the only greek affected. With that in mind, note the other greeks
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displayed in Exhibit 6.5 —especially theta. Proportionally, the biggest
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difference in the table is in theta. The disparity is due in part to interest.
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When the effects of the interest component outweigh the effects of the
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dividend, the time value of the call can be higher than the time value of the
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put. Because the call must lose more premium than the put by expiration,
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the theta of the call must be higher than the theta of the put.
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American exercise can also cause the option prices in put-call parity to
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not add up. Deep in-the-money (ITM) puts can trade at parity while the
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corresponding call still has time value. The put-call equation can be
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unbalanced. The same applies to calls on dividend-paying stocks as the
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dividend date approaches. When the date is imminent, calls can trade close
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to parity while the puts still have time value. The role of dividends will be
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discussed further in Chapter 8. |